Posted tagged ‘HP Board of Directors’

Cornell University 70 years ago made a decision to do the right thing in a situation that is regularly cited as an example of consummate sportsmanship – an example that corporate leaders who’ve fallen on their own swords like Mark Hurd might benefit from revisiting.

Closing in on a national football championship, Cornell’s team played their heart out on November 16, 1940 against Dartmouth College and won; but it turned out the winning point was the result of an officiating error which university officials realized later. Cornell’s president then sent a telegram to Dartmouth offering to forfeit the victory. Dartmouth, instead of letting the game stand, accepted Cornell’s offer to forfeit and became the winner. Cornell, “dejected and injury depleted,” lost the final game of the season.

One of the players on the team that year, now 91, was interviewed about Cornell’s decision seven decades ago. “I think they made the right decision – now,”he said. “At the time, I didn’t think so. But we did what was right.”

Ethical behavior in sports sets a standard for the game being about more than just winning. A leader like Cornell’s then-president Edmund Ezra Day being clear about what needs to be done to correct a mistake or problem and doing it, even if it seemed to work against the university’s self interest, sets a standard for leadership. As it turned out, Cornell got far more attention for its act of sportsmanship than it would have for actually winning a national championship. Seventy years later, Cornell’s integrity in that game is still being mentioned.

Ethical behavior in business, doing the right thing because it is the right thing to do, is consciously a part of how many CEOs operate. This month Andrew Liveris, chairman and CEO of Dow Chemical Company gave a talk at Bentley University on “Ethics as a Business Strategy.” Making the point that saying you believe in ethics in business and actually behaving ethically is two different things, Liveris talked about how Dow makes decisions and seeks to do the right thing. Questions in the packed audience of 700 students ranged from Dow’s global business practices to how he handles specific problems. Liveris appeared candid, wasn’t defensive, and didn’t duck anything asked.

Mark Hurd, who lost his CEO job at HP in August, was back in the news this week over further revelations of what he’d shared in his “close, personal relationship” with Jodie Fisher, a porn star he’d hired as a marketing consultant. The Wall Street Journal (WSJ) learned that in addition to a sexual harassment complaint, Fisher had also alleged that Hurd had told her about a confidential business deal HP planned.

Hurd lost the support of the HP board, according to the WSJ, because board members began to doubt his honesty in answering their questions. The law firm hired by the board to conduct an internal investigation turned up information that contradicted what Hurd had told them, and provided further evidence of his violations of HP’s code of conduct. His conduct was unbecoming a CEO, even as his business strategy was praised.

Doing the right thing is about making choices to live up to an internal code of conduct as well as those posted on walls and websites. It is ultimately about character, how sports teams and leaders show up in the world, and how each is remembered. It is about legacy: Cornell’s legacy of integrity has lived on since 1940.

(Courtesy, Fox News)

Interesting to note that it was also seven decades ago that Bill Hewlett and Dave Packard founded HP in a garage.

Their reputation for integrity has stood the test of time.

The legacy of Mark Hurd’s HP’s leadership 70 years from now? It may be in pictures.

Hewlett Packard’s Board of Directors demonstrated today (August 6, 2010) that if you violate HP’s Standards of Business Conduct (SBC) you can lose your job, even if you are the chairman and CEO.

Mark Hurd, who had served as HP’s CEO for the last five years (and chairman for four years), resigned at the Board’s request after an investigation concluded he had engaged in inappropriate behavior that violated HP’s SBC. The investigation initially began in response to a sexual harassment complaint by a former marketing contractor who retained Gloria Allred (known for taking on high-profile cases) to represent her. While HP did not find that the facts supported the complaint, they did reveal behavior the Board would not tolerate, paying a big severance package to end the relationship.

Hurd’s severance agreement is outlined in an SEC filinggranting $12.2 million, COBRA benefits, and stock options for a total package estimated to be somewhere between $40 and $50 million.

In a letter to employees August 6, 2010 interim CEO Cathie Lesjak outlined where Hurd had violated the SBC and the reasons for his departure. Lesjak, who also continues as CFO, wrote that Hurd “failed to disclose a close personal relationship he had with the contractor that constituted a conflict of interest, failed to maintain accurate expense reports, and misused company assets.” She indicated that each was a violation of the SBC and “together they demonstrated a profound lack of judgment that significantly undermined Mark’s credibility and his ability to effectively lead HP.”

The letter reminded employees that everyone is expected to adhere strictly to the SBC in all business dealings and relationship and said senior executives should set the highest standards for professional and personal conduct.

Hurd, who has been credited with driving HP’s turnaround, said in HP’s press release that “there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP….” He added that his resignation “is the only decision the board and I could make at this time.”

However, Hurd apparently fought resigning initially offering instead to pay HP back for the disputed funds. The board sent a critical message to HP stakeholders that delivering impressive financial and performance goals, as Hurd had done, wasn’t going to compensate for unethical conduct.

Hurd did get a free pass of sorts in 2006 when HP’s board violated HP’s SBC and “Global Master Privacy Policy” by approving pretexting to try and stop board leaks. The ensuing scandal involved federal and state investigations, a $14 million fine, loss of trust and reputation, and months of negative publicity. Hurd apologized but hid behind his performance role, saying he was focused on the turnaround and expected that others would ensure the compliance issues were handled appropriately.

Just as leaders don’t get a free pass when they miss performance goals, there ultimately isn’t a free pass when ethical standards aren’t met. Trust is essential in sustaining business performance. Leadership without ethical behavior is a failure of leadership.

So when Hurd wrote some time ago in the SBC’s preface that “We want to be a company known for its ethical leadership….” the problem wasn’t that the standard was too high to meet. The issue is Hurd wasn’t engaged in making real what that meant for him.

His message in the preface continued: “Let us commit together, as individuals and as a company, to build trust in everything we do by living our values and conducting business consistent with the high ethical standards embodied within our SBC.”

Tone at the top only counts when leaders use words that they believe in enough to live.